Fri Jul 23, 2004
By Meredith Grossman Dubner

CHICAGO (Reuters) - United Airlines said on Friday a new bankruptcy financing package prohibits the company from making any new pension payments, including nearly $500 million in contributions due this fall.

The airline told a bankruptcy court judge that its plans to hold off on a $404 million contribution in September and a $91 million contribution in October will give it more flexibility to manage its assets.

"It's a step to reduce our costs and attract the financing we're going to need to exit bankruptcy," Jake Brace, the airline's chief financial officer, told reporters.

The company did not say when the payments would be made.

United, a unit of UAL Corp. (UALAQ.OB: Quote, Profile, Research) , deferred a $72 million quarterly pension payment last week, triggering concerns from some unions that the company would make deeper cuts in underfunded pension funding to improve its balance sheet.

There was no immediate reaction from labor groups to the latest pension announcement.

Separately, United also announced that it had secured an additional $500 million in debtor-in-possession financing to keep operations going during restructuring.

The airline, which has been operating in bankruptcy protection since December 2002, said it has until June 30, 2005, to repay the loans.

The No. 2 U.S. airline said the deal for new financing involves four lenders, including a unit of General Electric Co. (GE.N: Quote, Profile, Research) Other lenders include J.P. Morgan Chase & Co. (JPM.N: Quote, Profile, Research) , Citigroup Inc. (C.N: Quote, Profile, Research) and CIT Group Inc. (CIT.N: Quote, Profile, Research)

The company was forced to seek new financing and broader costs cuts after the government denied its bid for a $1.1 billion loan guarantee.

United and other big global airlines have been pressured by record high fuel prices and competition from low-cost carriers.

Brace told reporters after the bankruptcy court hearing that the company's fuel costs this year are now estimated to be $900 million more than first thought.

UAL stock was virtually unchanged in over-the-counter trading at $1.30 per share.

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